LONG-TERM DEBT

Long-term debt at December 31 consisted of the following:



	2014			2013
6.75% Senior Notes due 2018	$	397.1		$	396.3
5.5% Senior Notes due 2020	350.0			350.0
Term loan facility due 2016	—			500.0
Revolving credit facility due 2016	—			300.0
Revolving credit facility due 2019	1,110.0			—
Mortgage facility⁽¹⁾	185.5			194.7
Capital leases and other debt	85.8			98.9
	2,128.4			1,839.9
Less: current maturities	(25.0		)	(30.1		)
Long-term debt, net of current maturities	$	2,103.4		$	1,809.8


⁽¹⁾	The mortgage facility requires monthly principal and interest payments of $1.7 million based on a fixed amortization schedule with a balloon payment of $155.4 million due November 2017.

At December 31, 2014, aggregate maturities of non-vehicle long-term debt were as follows:



Year Ending December 31:
2015	$	25.0
2016	12.8
2017	174.9
2018	399.7
2019	1,151.4
Thereafter	364.6
	$	2,128.4

Debt Refinancing Transaction

On December 3, 2014, we amended and restated our existing unsecured credit agreement (as amended and restated, our “credit agreement”). The credit agreement amendment, among other things, (1) replaced our $500.0 million term loan facility and $1.2 billion revolving credit facility under our prior credit agreement with a $1.8 billion revolving credit facility, (2) provided lower commitment fees and loan margins as set forth in the credit agreement, (3) increased the maximum capitalization ratio from 65.0% to 70.0% and (4) extended the stated termination date to December 3, 2019. See “Senior Unsecured Notes and Credit Agreement” below for additional information regarding our credit agreement and “Restrictions and Covenants” for additional information regarding our financial covenants.

The indebtedness outstanding under the prior credit agreement was paid off with proceeds from the amended and restated credit agreement. We expensed $1.6 million pre-tax in the fourth quarter of 2014, related to this transaction, including $0.4 million for the write-off of certain unamortized debt issuance costs associated with the prior credit agreement.

Senior Unsecured Notes and Credit Agreement

At December 31, 2014, we had outstanding $397.1 million of 6.75% Senior Notes due 2018, net of debt discount. Interest is payable on April 15 and October 15 of each year. These notes will mature on April 15, 2018.

At December 31, 2014, we had outstanding $350.0 million aggregate principal amount of 5.5% Senior Notes due 2020. Interest is payable on February 1 and August 1 of each year. These notes will mature on February 1, 2020.

As described above under “Debt Refinancing Transaction,” under our credit agreement, we have a $1.8 billion revolving credit facility that matures on December 3, 2019. The credit agreement also contains an accordion feature that allows us, subject to credit availability and certain other conditions, to increase the amount of the revolving credit facility, together with any added term loans, by up to $500.0 million in the aggregate. As of December 31, 2014, we had borrowings outstanding of $1.1 billion under our revolving credit facility. We have a $200.0 million letter of credit sublimit as part of our revolving credit facility. The amount available to be borrowed under the revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative amount of any outstanding letters of credit, which was $45.6 million at December 31, 2014, leaving an additional borrowing capacity under the revolving credit facility of $644.4 million at December 31, 2014.

Our revolving credit facility provides for a commitment fee on undrawn amounts of 0.20% and various interest rates on borrowings generally at LIBOR plus 1.50%. The credit spread charged for our revolving credit facility is affected by our leverage ratio. For instance, an increase in our leverage ratio from greater than or equal to 2.0x but less than 3.25x to greater than or equal to 3.25x would result in a 12.5 basis point increase in the credit spread.

Our senior unsecured notes and borrowings under our credit agreement are guaranteed by substantially all of our subsidiaries. Within the meaning of Regulation S-X, Rule 3-10, AutoNation, Inc. (the parent company) has no independent assets or operations, the guarantees of its subsidiaries are full and unconditional and joint and several, and any subsidiaries other than the guarantor subsidiaries are minor.

Other Debt

At December 31, 2014, we had $185.5 million outstanding under a mortgage facility with an automotive manufacturer’s captive finance subsidiary that matures on November 30, 2017. The mortgage facility utilizes a fixed interest rate of 5.864% and is secured by 10-year mortgages on certain of our store properties. The mortgage facility requires monthly principal and interest payments of $1.7 million based on a fixed amortization schedule with a balloon payment of $155.4 million due November 2017. Repayment of the mortgage facility is subject to a prepayment penalty.

At December 31, 2014, we had capital lease and other debt obligations of $85.8 million, which are due at various dates through 2034. See Note 8 of the Notes to Consolidated Financial Statements for more information related to capital lease obligations.

Restrictions and Covenants

Our credit agreement, the indentures for our 6.75% Senior Notes due 2018 and 5.5% Senior Notes due 2020, our vehicle floorplan facilities, and our mortgage facility contain numerous customary financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities.

Under our credit agreement, we are required to remain in compliance with a maximum leverage ratio and maximum capitalization ratio. The leverage ratio is a contractually defined amount principally reflecting non-vehicle debt divided by a contractually defined measure of earnings with certain adjustments. The capitalization ratio is a contractually defined amount principally reflecting vehicle floorplan payable and non-vehicle debt divided by our total capitalization including vehicle floorplan payable. Under our credit agreement, the maximum leverage ratio is 3.75x (no change from our prior credit agreement) and the maximum capitalization ratio is 70.0% (compared to 65.0% under the prior credit agreement). In calculating our leverage and capitalization ratios, we are not required to include letters of credit in the definition of debt (except to the extent of letters of credit in excess of $150.0 million). In addition, in calculating our capitalization ratio, we are permitted to add back to shareholders’ equity all goodwill, franchise rights, and long-lived asset impairment charges subsequent to September 30, 2014 plus $1.53 billion.

The indentures for our 6.75% Senior Notes due 2018 and 5.5% Senior Notes due 2020 contain certain limited covenants, including limitations on liens and sale and leaseback transactions. Our mortgage facility contains covenants regarding maximum cash flow leverage and minimum interest coverage.

Our failure to comply with the covenants contained in our debt agreements could permit acceleration of all of our indebtedness. Our debt agreements have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of AutoNation.

Under the terms of our credit agreement, at December 31, 2014, our leverage ratio and capitalization ratio were as follows:



	December 31, 2014
	Requirement	Actual
Leverage ratio	≤ 3.75x	2.30x
Capitalization ratio	≤ 70.0%	59.2%

Both the leverage ratio and the capitalization ratio limit our ability to incur additional non-vehicle debt. The capitalization ratio also limits our ability to incur additional vehicle floorplan indebtedness.

In the event of a downgrade in our credit ratings, none of the covenants described above would be impacted. In addition, availability under our credit agreement described above would not be impacted should a downgrade in the senior unsecured debt credit ratings occur.